With China offering lucrative incentives to engineering graduates, what can the United States of America do to keep the world's top talent focused on Silicon Valley?

US President Barack Obama must this year deliver on his election promise to the Hispanic community of comprehensive immigration reform. But his administration will also address the less prominent but economically vital visa regime for high-tech workers. Immigration in STEM (science, technology, engineering and maths) is arguably as badly broken as the mainstream process.

US technology companies have long said that they struggle to hire enough skilled foreign workers to meet a domestic shortage. Now, one thing pushing STEM immigration from being a challenge to being more of a crisis is the increasing global demand for human engineering resources.

Competition from China is the main factor; however, the rest of the world smells American blood. Today's engineering market is one of the most globalised, commercially and academically speaking. US reforms need to be both nationally acceptable and internationally attractive if the westward flow of talent is to resume. The effect of this could be to make job opportunities worldwide better than for quite some time.

The natural choice

For decades, the US was the first choice for high-tech researchers. It had more world-class universities than anywhere else, it promised the best commercial opportunities, and it offered an attractive quality of life. In return, immigrants fuelled economic growth, notably in Silicon Valley.

A widely cited 2007 study by Duke University and the University of California, Berkeley found that, between 1995 and 2005, 52.4 per cent of Valley start-ups had one or more immigrant founders against a US national average of 38.8 per cent. It also estimated that non-US nationals contributed to 24.2 per cent of patent filings from the US in 2006, up from 7.3 per cent in 1998.

One of that study's authors now sees these trends threatening to reverse. Vivek Wadhwa is an Indian-American academic and the founder of two start-ups. Late last year, he published 'The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent'.

Part of his argument is that the US has lost sight of the most important component in any STEM immigration policy: the immigrants themselves. "When countries have tried to imitate Silicon Valley, it has often been about buildings, and capital, and infrastructure: 'We'll put this technology zone here and it will work'," says Wadhwa. "But it's all about people; finding a very small number of people who can move into entrepreneurship at the right time."

He draws a stark contrast between smart people that the US largely recruits though the H-1B visa scheme and how that scheme militates against them becoming greater contributors to society.

Structural problems with H-1B include its limited duration (three years, renewable for another three), the increasingly lengthy gap between receiving the visa and then moving to a Green card and ultimately US citizenship (often more than a decade), and a quota system that restricts holders from any one country to just 7 per cent of the annual allocation (preventing the US from fully pulling on the rapidly expanding engineering populations in China and India). Wadhwa's main objection though is how these issues combine to cramp entrepreneurship.

"As soon as your H-1B expires or your job ends while you are still on one you have to leave the country. You cannot seek employment with another company or start one on the same visa," Wadhwa says. "If your H-1B is through a university, and you want to participate in a start-up here, probably one that comes out of the research you've just completed, it's frighteningly difficult."

A postgraduate moving to the commercial world has to jump hurdles like putting together a US board which can provide guarantees that the company will provide long-term employment for the non-citizen. Intrinsically, it is fair to ask how just about any start-up can demonstrate that.

"Compare that to, say, Canada," Wadhwa notes. "If you can provide a business plan that they consider viable, even if you don't have backing, then there is a path to a visa. But the other important thing is that those entrepreneurs ultimately represent a very small number; you can't waste these people."

This inherent time-lag in the H-1B has also caught the attention of the IEEE-USA, the domestic lobbying arm of the IET's North American sister society. Making highly-skilled immigrants linger before they can fully participate in US commercial life effectively keeps them out of the start-up market, according to Russell Harrison, its senior legislative representative.

"There is a really small window in terms of entrepreneurship. Generally, really smart young guys start companies in the first few years after they come out of the academic world. The ideas are new. They've got the energy," he says. "You leave it a while and you get married, you have kids... Well, you might have been likely to start a business, but now you don't feel you can take the risk.

"So, for people from outside the US, saying to them, 'Give it five years and we'll give you a Green card, and then another five and we'll make you a citizen', it just doesn't do it."

Going home

In the past, the US didn't just have technological pre-eminence; it was effectively unchallenged. Europe had opportunities, but the US's other benefits and economic scale gave it an apparently unassailable lead. Today's graduates have broader horizons.

"The Chinese are really working the system," says Wadwha. "They will approach Chinese citizens in the US system and offer them salaries, facilities, housing to come home and develop their businesses in China. The pitch is very personal.'"

The IEEE's Harrison has seen much the same thing happening, and while China is leading the charge, it is by no means alone.

"In May 2011, there was a briefing to Congress. A really smart guy, Taiwanese, gave evidence and his message was, 'I have a choice'," Harrison recalls. "He'd invented an implant that treats glaucoma. And it worked. It was already at or close to FDA [Food and Drug Administration] approval. But from a US point of view, he was 'in the queue'.

"However, he had had the Taiwanese, the [South] Korean and Singaporean governments all actively coming to him and saying, 'Look, what do you need? Come and set up your company in our country.'"

The Chinese 'sea turtle' – a pun on the word 'returnee' in Mandarin – is the main challenge the US now faces, particularly since, along with their Indian counterparts, Chinese immigrants to the US are more likely to be entrepreneurs.

"Here," says Harrison, "one good example concerned a super-bright Chinese kid in semiconductors out of Stanford. One of the big US companies wanted to recruit him. Their pitch was, 'We'll get you a [H1-B] visa, sponsor you for a Green card. Then when you get that in five years, you can go for citizenship. And then five years after that, here are all these exciting things we can do.'

"The Chinese put him on a private plane, picked him up in a limo, and said, 'Here's your office, here's what we'll pay you, here's your house, your car, a visa so your partner can work. Come home and start now.'"

While the US has dawdled over H-1B reform, China's programmes to attract academics and entrepreneurs have continued to grow. So have, as Harrison's first anecdote suggests, those in Singapore and Korea as well as others in nations such as Australia, Canada, Chile and the UK.

"The truth is that after all that attention, both these Taiwanese and Chinese geniuses wanted to stay here, even though we weren't making it easy. But as Taiwan and China and all these countries become more comfortable places to do business, that isn't going to last."

Finally, he underlines another of Wadhwa's key points. "There aren't that many of these people around. Our loss will be somebody else's gain."

All the talents

In 2008, the Chinese government launched the 'One Thousand Talents', an RMB40bn (£4bn) scheme aimed at wooing academics and entrepreneurs across 3,000 different strands.

Significantly, the scheme has expanded into both a 'Thousand Young Talents', reflecting the need to catch start-up founders early, and a 'Thousand Foreign Talents', a modest-but-significant attempt to attract non-Chinese nationals. That latter breaks with long-standing political and cultural traditions that the country would build its future using its own human resources.

According to David Zweig, professor at the Hong Kong University of Science & Technology who has made returnees a specialist area, right now the entrepreneurship side of the strategy is yielding better results.

"On the academic side, there is still a strong feeling that resources are allocated according to the old boy's network," he says. "So, although there may be the promise of advanced research facilities, returnees feel that existing staff have first call on them. Certainly I've heard reports that returnees can have to wait three years or so before they can expect to get grants from state bodies like the Natural Sciences Foundation and the Ministry for Science & Technology.

"But among entrepreneurs, there is more enthusiasm. People can see opportunities. And there the bureaucracy works in your favour."

In addition to One Thousand Talents, Zweig here cites an increasing number of local schemes fostering start-ups.

"One is in the city of Wuxi [in the eastern province of Jiangsu]. Already you have venture capital in China, with funds looking to invest in Chinese businesses, but in Wuxi they have the '530 Plan'. As well as providing facilities and accommodation, the city will put up half the money for your business," he says. "Now that's very attractive."

The early waves of Chinese returnees are widely thought to have been built upon the phenomenon of what Wilf Corrigan, British-born founder of US technology group LSI, has called 'tomorrow's newspaper'.

Through their experiences as academics and/or Silicon Valley staffers in the US, these sea turtles had access to technologies that were not new but nor had they yet reached the Middle Kingdom during its first phase of economic liberalisation. This much was confirmed by a 2004-05 returnee survey Zweig undertook which found that 55 per cent cited "access to a technology that wasn't available in China" as either the main or second reason for going home.

Today though, one key plank in China's preceding and current five-year plans is summed up in the oft-seen slogan" "From 'made in China' to 'created in China'". The country is determined to translate its hard-won mastery of high-tech third-party manufacturing into the generation of its own intellectual property for products that go into its megafactories.

Interestingly, the actual immigration numbers targeted by schemes like One Thousand Talents are small – in the four figures. About 2,900 have been signed up under the scheme so far. But the goal is to harness the same multiplier as built the US technology sector by identifying that small group of people who can create companies that employ tens, potentially hundreds of thousands.

It ain't over

Late last year, the IEEE played the central role in authoring The STEM Jobs Act of 2012 which managed to secure rare bipartisan support in the US legislature until it was blocked by the White House.

It would have given 55,000 permanent residency visas to foreign masters and doctorate graduates from US universities, overcoming many problems Wadhwa and Harrison identify. The problem was that the Obama administration wants such measures to be part of its big, all-encompassing package – especially if Republicans broadly support them, where they are more opposed to reforms aimed at Latinos.

That debate has got STEM much higher up the immigration agenda. The real challenge for lobbyists like Harrison is getting Washington politicians to see it in the full context of not just a local fix but also global competition.

So will the STEM measures ultimately pass? A big bill is a big ask. STEM might even have to wait for that process to fail and then once more be considered discretely.

The real question, though, is this: how long does the US have before it itself surrenders too many attractions to technology workers and others are whittled away by rivals?

One other thing is acknowledged. Rival proposals that the US can fix the problem by focusing on STEM within the domestic education system and producing technologists of its own will no longer fly. "We've got five to seven years," says Wadhwa. "If you fixed the entire education system tomorrow, it would be a decade before you saw any results."

Harrison is even blunter. "We have to sell our advantages now."

Meanwhile, China isn't letting up. At its late 2012 Party Congress, the country hinted at still further changes to its visa system for attracting foreign nationals. There too, there is no guarantee of success. Incoming leader Xi Jinping has openly cited corruption as a major concern, and many question whether the country's economic growth rate can be maintained.

Those are major questions, but the international competition for engineering talent only looks set to intensify in the coming months.

Chile shows the way for the rest of the world

If China (and maybe soon, the US) can flash the cash and more besides to attract highly skilled entrepreneurs and workers, does Chile provide pointers as to how small and medium-sized nations might compete for the finite pool of global engineeing talent?

The country launched 'Start-Up Chile' in 2010. It is a pathfinder for the kind of people-led immigration/entrepreneurship model promoted by Vivek Wadhwa. Not that surprising, since he consulted with the government to get it going.

The idea is simple, shockingly so. If accepted, you get a $40,000 equity, free, no-strings-attached grant and an initial one-year visa. There is office space as well as help in getting bank accounts, settling in and learning Spanish. Basically, that's it.

More important, if things don't work out the company walks away after a minimum of six months and everyone shakes hands.

Through Corfo, Chile's state investment agency, the government wants to seed at least one $1bn technology company and a clutch of smaller ones. It's about the creation of a knowledge economy in a country traditionally focused on natural resources.

For the entrepreneur, it's a chance to get moving in one of Latin America's most stable economies. The main challenge is getting your idea through a review committee made up of Silicon Valley mavens and Chilean government advisors.

Approval is no simple task. The ratio of applications to places has already doubled from 3:1 to 6:1 and continues to rise as the scheme gets more international attention.

Start-up Chile attracted 22 companies in its pilot year, and a little under 200 during 2011. The target is 1,000 'bootstrappers' by the end of 2014.

It has already informed some aspects of 'Start-up Britain', launched last March. However, the Chilean version is more explicitly immigration-based.

Engineering incentives

Whenever China undergoes a change of leadership, there are, quite naturally, always questions over how assiduously the new guard will follow the policies of the old. These questions can't be answered until the new regime has bedded in.

The initial signs regarding technology and related immigration nevertheless suggest that the country will step up its drive to recruit returnees and foreigners.

In mid-January, one of the main outreach agencies, the State Administration of Foreign Experts Affairs, said that it would increase its effort to attract "high-calibre talents from overseas".

According to its general director, Zhang Jianguo, SAFEA is now to engage headhunters for its search, as well as working with various trade and academic associations. This extension of the Thousand Foreign Talents programme will concentrate on "engineering materials, bioscience and information science," he added.

Each selected candidate will receive a subsidy of about $160,000 and up to $800,000 more to fund research projects.

At the same time, outgoing Premier Wen Jiabao chaired a meeting of China's cabinet, the State Council, that signed off on plans to build out more infrastructure for major science and technology projects through until 2030.

The Medium- and Long-Term Plan on Infrastructure Construction for China's Major Science and Technology Projects includes "engineering technology" as one of its seven core areas.

The council also said that it will tighten IP protection, particularly for computer software, addressing a further concern voiced by entrepreneurs considering a move to China.

Wen Jiabao is expected formally to hand over to new Premier Xi Jinping this coming March.